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Lean Roadmap Newsletter
Becoming a World Class Organization 
31st Edition   
 
The topics for this edition are: 
  • What Happens in an Organization When Top Management Does Not Fully Communicate?
  • Start De-Departmentalizing Now!

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What Happens in an Organization when Top Management does not Fully Communicate? 
If "Lean" is the engine that makes your organization World Class, then organizational communication is the fuel for that engine. Developing great 2-way communication throughout a business, like the success of the Lean implementation itself, requires top management leadership and support.

by Mattie Watson 

 
When the Leadership Team in an organization doesn't communicate, people in that  organization will learn about what is going on through the "rumor mill." Organizational change is discovered, not announced. Remember, a rumor's sole purpose in life is to fill in voids in communication. Generally, the rumor mill is the only reliable way of obtaining information when the Leadership Team fails to effectively communicate. Unfortunately, rumors tend to be distortions of the truth or complete untruths. People know when change is in the wind so they tend to believe the rumors. They see management going to off-site meetings and get involved in different types of training. Managers and supervisors come back from these events speaking a different language and acting differently.
 
If management does not effectively communicate the vision for the future, and the impact that change is going to have on the organization and the people, then confusion and rumors ensue and resistance and resentment develop as a result of the rumors (as depicted in the model shown below).

Human Nature

 
Confusion and rumors begin to spread fear in the organization and resistance begins to develop. It now takes a great deal of effort to change or overcome the resentment that has set in. In some organizations, management is never able to change or recover from the resentment that has occurred.

Additionally, the confusion, rumors, and fear has a huge negative impact on the organization's productivity because while your associates are fearful and discussing the latest rumor, they are not adding value to the organization's products or services.
 
An effective Leadership Team can short circuit this confusion, fear, resistance, and resentment loop by announcing the change and communicating it to everyone at the same time. Then by communicating, communicating, and communicating about the change, the Leadership Team can begin to develop interest from the organization in the change (see figure below). The Leadership Team must continue to grow this interest, enthusiasm, and excitement by providing ongoing communication updates to the vision and the plan for what the organization will look like one, three, and five years down the road.

Human Nature and Communication

 
  
 
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  Start De-Departmentalizing Now!
Using Lean as the "system" to run your business is the only way to fully utilize Lean's potential to make your organization World Class. 
 
by Larry Rubrich 
 
Many companies have used Lean/World Class business improvement techniques to make their production areas more competitive and improve customer satisfaction, yet these same companies often still find themselves falling short of being able to compete globally, and therefore consider chasing the low wages of a foreign country. 
 
Why are these companies having trouble competing globally? The answer to this question is that the costs that end up in the selling prices of our products are not just manufacturing costs, they are the costs of the entire Enterprise. To compete globally, we need a Lean Enterprise. The reasons we have not applied Lean to the entire Enterprise are noted below. 
 
First, we have defined "adding value," an absolutely critical measure in Lean, in manufacturing terms. It is defined as "changing the shape or form of the product" or as "what the customer is willing to pay for." These both have manufacturing connotations. This is supported by the fact that many Value Stream Mapping books only consider the manufacturing operations when calculating the percent of value-added time. What about the cost (and impact on our lead-times) of the ten days the customer's order spent in the administrative or engineering areas before it hit the shop floor?
 
Secondly, this manufacturing definition of adding value has led us to ignore the administrative function and its impact on overhead costs. Yet, can we produce a physical product in manufacturing without the "knowledge product" or "information product" known as the engineering drawing? Or without the customer order entered into our system, or without raw materials? Or could we produce a quality product without standard work?
 
The administrative areas of our companies do produce a product - not like the physical product we produce in manufacturing - but a knowledge or information product that supports the production of the physical product. Unfortunately, our Lean concentration in manufacturing and our lack of understanding of what products are produced in our office areas, have left us with administrative areas that are the least productive area of our companies.

Why are administrative areas the least productive part of our business? One reason: we don't do something in our administrative areas that we always do in manufacturing - measure! We know how many widgets all of our machines can produce in an hour, and how many widgets we can assemble and ship in a day, but we don't know how many information/knowledge products (quotes, customer orders, new designs, work orders, part purchases, etc.) we can do in an hour or a day.
 
Once the administrative functions understand that they are in production also, there is one other roadblock/barrier to system thinking. Administrative departmentalization! Companies have known for many years that the cellurization of our manufacturing processes (grouping machines by product or family of products rather than by function) makes them significantly more efficient, yet we have almost no cellurization in our administrative areas. Departmentalization roadblocks businesses from achieving the Lean Enterprise because:   
  • Departmentalization usually means individual department goals. Individual department goals prevent teamwork throughout the organization, since everyone is most concerned about achieving their own department's goals and how that will impact their own performance reviews and merit pay increases. 
  • Individual department goals reduce the system efficiency since it causes individuals within a department to make bad decisions. For example, people working for a department (instead of the system) generally process the "information product" passing through their department in production batches. They use batch production, because for their department, batching is most efficient (because of mental or physical setup time). Unfortunately, batching stops the information product flow, extending the information product lead-time, and making the system less efficient. Additionally, these individual department goals may cause other behaviors detrimental to system efficiency. The salesperson who only cares about "getting the order" and not making sure all the required information to produce the order is obtained, or engineering tossing product design "over the wall" to manufacturing
  •  even though the design is not production ready.
  • Departmentalization inhibits cross-training, which prevents associate growth. It limits the full utilization of our mental resources in improving the system efficiency since few people understand how the system operates. 
  
 From typical administrative layout:
 
Lean Admin - Before Cells
 

 
To administrative cell by Information Product process (Order Entry cell shown):
 
Lean Admin - Cell
   
 
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Next Edition 
 
Do You Want Teamwork in Your Organization? Here are the Four Requirements Necessary for Teamwork to Develop in any Organization
 
The First of Five Strategies for Competing in the Global Economy for Small and Medium size Manufacturers
(SMMs have < 500 people).
Strategy #1 - Competing on Price Only
 
Larry Rubrich
WCM Associates LLC
2010 WCM Associates
 
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